Trade groups are suing to block late credit card payment limits

Six trade groups sued the Consumer Financial Protection Bureau on Thursday over a new rule that would cap most credit card payments at $8 a month.

The court case, filed in federal court in Fort Worth, asks the court to strike down the rule, which the consumer agency completed two days ago. The complaint alleges that the agency violated agency regulation laws and exceeded its statutory authority, and states that consumers will suffer financial harm if the rule goes into effect.

“Late fees encourage on-time payments, which in turn helps card issuers manage credit risk and reduce costs, allowing them to offer more competitive terms and features,” the trade groups wrote in their complaint.

A spokeswoman for the consumer agency said the rule “closes a long-standing loophole exploited by credit card giants to turn late fees into a major revenue stream.” The rule, which applies to issuers that have more than 1 million open credit card accounts, would cut most fees from their current average of $32, saving households $10 billion a year, according to consumer agency estimates.

The spokeswoman added that the agency would contest the lawsuit.

The lawsuit was filed by the American Bankers Association, the Consumer Bankers Association, the U.S. Chamber of Commerce and three Texas business associations.

“Once again, we are reluctantly forced to sue a federal regulator because the CFPB has ignored comments from industry and other stakeholders demonstrating that this rule exceeds the agency’s statutory authority and will hurt rather than help consumers.” , said Rob Nichols, president of the American Bankers Association. general manager. (His group is part of active lawsuits against the consumer bureau over its attempt to investigate financial companies for signs of customer discrimination during routine surveys.)

The trade groups have asked the court for a preliminary injunction to block the rule, which would otherwise take effect within a few months.

The case was filed in a court within the jurisdiction of the U.S. Court of Appeals for the Fifth Circuit in New Orleans, which previously ruled that the consumer agency’s funding structure violated the Constitution’s Appropriations Clause. That ruling is before the Supreme Court, which heard arguments on it in October.

Consumer advocates said they expected both the process and the location. The trade groups “intentionally chose a conservative-leaning, industry-friendly court in hopes of derailing any kind of regulation that would hurt their bottom line,” said Liz Zelnick, program director at Accountable.US, a progressive research group.

President Biden, who has made combating “junk fees” a signature effort of his administration, is likely to promote the consumer agency’s rule in his State of the Union address Thursday evening.

Critics accused the consumer agency of rushing the rule — which has been in development for more than a year — to promote Mr. Biden’s political agenda. Lindsey Johnson, CEO of the Consumer Bankers Association, said Thursday that the agency was trying to “provide some short-term headlines for a White House looking for political victories.”